Author Question: ABC Company has been growing at a 10 rate, and it just paid a dividend of Do= 3.00. Due to a new ... (Read 64 times)

james9437 · **on:** Jul 10, 2018

ABC Company has been growing at a 10 rate, and it just paid a dividend of Do= 3.00. Due to a new product, ABC expects to achieve a dramatic increase in its short-run growth rate, to 20 annually for the next 2 years.

After this time growth is expected to return to the long-run constant rate of 10. The company's beta is 2.0, the required return on an average stock is 11, and the risk free rate is 7. What should the dividend yield (D1/Po) be today? (Round to the nearest whole percent.)
A) 4
B) 5
C) 10
D) 8
E) 2

Question 2

Which of the following is NOT a source of unsecured short-term credit?

A) trade credit B) commercial paper
C) floating lien D) a line of credit